University business case and the Economist

Lots of discussion about universities´ business models. The Economist is questioning the use of higher education and complaining about the price. Partly ok and  so wrong. In education marginal cost (that is additional cost) of educating one more student will collapse due to digital provision of lectures, tests and materials. If institutions can bear the fixed costs of maintaining and developing online sources, MOOCs, the fee they charge per course will also decline towards the marginal cost. Hopefully the forces competition are allowed to work. Therefore any restrictions or subsidies by governments are bad for education. Even donations can be seen as a distorting power. Donations should be targeted towards students and their ability to participate education, that is demand-side, since that is where the talent and potential can be found. In sum, digitalisation allows production of education with a fraction costs of today. That means also higher education. Compare development of civilisation and access to education in history. No need for further discussion.

In fact, in digital eduction era the demand for education becomes point of interest. Everyone with an access to broadband world, funds for (low) education fees and ability to allocate time&effort can develop skills, knowledge and wisdom. Unlimited talent nurturing becomes possible. True competition of brilliant minds in making. Certain minds clever enough can drive themselves but the rest will need guidance. That is coaching by professors, coaches, parents, professionals, neighbours etc. Moreover, trustworthy ways to monitor and verify skills and intelligence is needed. Well we have already now all those tests like GMAT or Mensa International or whatever rating agencies. Or will Harvard, Stanford or MIT be the future student rating institutions.

Then you argue that it is the network you get from the university. Forget it. You are what you do these days. And you network is in Facebook, LinkedIn, Twitter and Instagram. Rating agencies can analyse already now the strength and quality of your network.

That is for the education.

How about research? It is more diverse due to the fact that research is not homogeneous as an activity. Consider three different types of research:

  1. Infrastructure-based: physics, chemistry, technical sciences, natural sciences that need expensive research infra.
  2. Empirical data-based: economics, social sciences, natural sciences, behavioural sciences
  3. Theoretical: Mathematics, theoretical approaches in all sciences

Clearly success in infra-sciences depends on fixed investment on expensive infra, like CERN or space centers etc. But there is a trick. With digital tools you can simulate the infrastructure. Therefore, gains based on physical laboratory investments are declining rapidly and gains on super-computer investments might pay-off. Anyway this side is and will be a money-game.

Success in data-based sciences is about a quality and an access to data. That is not clearly a money-driven game since networking, ability to connect data sources and skills to handle data will pay-off more. And for radical findings a lap-top will do if you have unique data-set and intelligence.

Theoretical sciences are the least dependent on investment. On the contrary, scarcity of physical means can do good for theoretical research. Naturally food for thought is needed in the form of networks and discussions between peers and others.

What's the business for research results? Patents, discoveries, reputation, ability to reach even higher standards in research and eventually increased wealth of all nations. Did the Economist argue that this is not interesting and that we need more lower level of education since returns on investment in research is in decline. I think it is a matter of instruments of wealth creation. Today it is about government finance, donations, tuition fees. Then there is effort to make money from tech transfer (patents etc) and start-ups. Hope that works. Well, maybe other tools and instruments could be developed. Those future concepts could be developed by utilising all the results and resources universities have to cover costs running an university makes. In the core of an university concept is the presence of forces that support each others and catalyse change: good resources/infra/atmosphere/freedom of thinking draws in brilliant professors. Professors generate digital education materials/research results that draw in masses of students, firms and other actors. All this creates lots small positive streams income and thinking creating self-supportive catalyst-process that produces ultimately continuous development of civilisation.

That's my ten cents. The Economist is right in arguing that there is no bang for the buck in the US universities (story). But short sighted in not stating the digital disruption and already emerging changes in university business models. Even more severe weakness was to put aside the significance of higher education for the man-kind.

Go to university whatever it takes. You are worth it.



YliopistoAtso Andersen